Structuring a Deal for a Fix and Flip
Hey guys!
So, I am structuring my first fix n' flip deal and I am looking for your opinion on types of loans and strategies that I am tossing around. I just finished selling my first duplex and am using the proceeds for this next deal.
So, I am trying to wrap the property up for around 100K and the comps in the area range from 190K-230K. My goal with this deal is to put in around 25K worth of repairs and sell it for around 150K-160K
(I currently have around 30K cash)
That being said, I have started looking at rehab loans in my area and I am able to fund the loan with a 25K rehab cost built in. However, this would suck up my free cash as the loan costs around 23K to originate.
I am also considering doing an FHA (I just sold my last FHA loan with the duplex).
I like the idea of FHA because of the low downpayment option and then my ability to fund the remodel with the free cash I have saved up. However, it means paying down less of the property and needing to fund the repairs exclusively out of pocket.
The property is an area where it will still cashflow around $500/month if I rent it out. It is currently going to be listed with my real estate agent and the property looks like garbage. Needs the floors to be sanded, new paint interior and exterior, new kitchen and new bathroom. It is in a B class neighborhood and the current owners (I assume) do not have the capital to do these repairs. This is why I am assuming they will take my offer of 100K for the property instead of the market value of 150K. There is TONS of garbage and the property has been neglected.
That being said, if flipping it doesn't pan out, it may also be a good buy and hold option.
Anyway, what are your opinions!??
Best,
Josh